The Ethereum Altair Upgrade – Merging PoS With The Beacon Chain

The Ethereum Altair upgrade was completed on October 28, 2021. This is part of the transition to ETH 2.0, as PoS (Proof-of-Stake) consensus mechanism merges with the Beacon Chain.

The upgrade implements the following:

light-client support to the core consensus.
Setup of beacon state incentive accounting.
Fixes validator incentives issue.
Penalties for offline or inactive validator nodes per EIP 2982.

Over 95% of the network participated at the time of the upgrade’s first epoch. This is the first upgrade to the Beacon Chain since going online in December 2020 and could also be the last before the merge with PoS on the Ethereum mainnet.

According to IntoTheBlock researcher Lucas Outumuro:

“Through the Altair upgrade, Ethereum sets the base for this vision, enabling the upcoming merge of the proof-of-work chain and the Beacon Chain. Finally, these are expected to benefit Ether holders and stakers by making it deflationary while offering higher returns to validators.”

The recent London Hard Fork had introduced a base fee as part of EIP 1559 with a coin burning mechanism that adds a deflationary feature to Ethereum. During the first 48 hours of that upgrade, $30 million in ETH were burned from the network’s circulation. As of 10/30/21, 681,030 ETH have been burned that is valued at $3,013,073,269. This puts pressure on supply as it decreases and drives the price of ETH higher due to market demand.

With ETH 2.0 set for deployment in 2022, Altair is part of the preparation. Altair is a hard fork, which means that the 250,000+ validator nodes who didn’t upgrade are now considered offline. Their ETH will then slowly diminish at about 10% per year. This was included in Altair as a sort of way to push for moving towards the upgrade. This not only benefits the validators, but the network as a whole as it comes to an agreement to pave the way for Ethereum’s next phase.

Bitcoin And Twitter Integration May Not Bring Decentralized Social Media

There have been reports of Twitter integrating Bitcoin (BTC) tipping from their app. This would allow users to receive BTC from their followers or from anyone who appreciates their content. This would require some payment integration with the Bitcoin blockchain, allowing Twitter accounts to receive BTC tips. While there is no final word on that ever becoming a feature (as of posting), it is generating excitement among crypto-fanatics on social media.

Tipping on Twitter is possible using a third party payment channel. It is called the Tip Jar service, and you can receive money that goes through a payment processor like PayPal. It would also be possible to receive crypto like BTC, but once again this is assuming Twitter will actually integrate crypto. Jack Dorsey (Twitter CEO) did mention before that he has plans for Bitcoin and Twitter, but whether this is part of the plan remains to be seen.

Due to this news, can we also assume (or expect) that Bitcoin will help make Twitter a more decentralized social media platform? After all, Bitcoin is based on the ideology of decentralization and censorship resistance. Those are things that Twitter is actually not known for. They are highly centralized with a team of systems administrators and moderators who check content and have even banned a former head of state and public figures who have violated their terms of service. Twitter has also been accused of bias when it comes to content, but there has been no undeniable proof that has been determined by the court of law.

Decentralization means there is no one controlling the platform. That is in contrast to Twitter. The Bitcoin network is considered decentralized because no single entity controls it. It consists of independent nodes that verify payments, hold copies of the blockchain database or mine blocks for rewards. If one of the nodes goes down, the entire network can still operate. If Twitter were to shut down, it affects the entire network operations. With decentralization you also have platform neutrality because no one is going to restrict any user’s action, even if they have consequences (this is another topic for debate).

In a decentralized platform, there are no admins or moderators who check the content. Not even AI algorithms that make sure users are following the company policy. There is no need for that, so a truly decentralized platform is not regulated. It can still deal with bad actors, but that requires community to come to a consensus. Decentralized networks are based on this mechanism to keep users honest and properly behave. With Twitter, it is decided by a few people at the top of the organization. You can make the argument that Twitter can do what it wants because it is their platform. That is fine, but it is the perfect example of a centralized organization.

Some would say making the software open source paves the way to decentralization. The Twitter app is open source just like Bitcoin. They are both open source, yet one is centralized and the other is not. Therefore it is not about being open source. It is really more about organizational structure and policy. Twitter can become decentralized if it has not main office or central authority for leadership. Bitcoin does not even have a recognizable executive team like Twitter. Its founder is an anonymous user and it has no directors or employees. Those who work in Bitcoin development are for the most part volunteers.

So even with Bitcoin integration it is not likely Twitter will become decentralized. Just because a company uses crypto does not mean they follow the principles behind it. Even digital exchanges like Coinbase and Binance have a high degree of centralization, despite embracing the cryptospace. They have an executive board, they can shut down accounts, ban users and manipulate data. As long as the organization exists as a single entity with board members consisting of a few people not voted through consensus, it will not be decentralized.

(Photo Banner Credit: JESSICA TICOZZELLI)

VISA Gets Into NFT With CryptoPunks

VISA has announced the purchase of a CryptoPunk NFT (Non-Fungible Token) worth approximately $165,000 (~50 ETH this August 18, 2021). Perhaps the most unlikely thing you would expect VISA (the financial credit company) to invest in. VISA is apparently bullish on NFTs, or could this just be another signal to show they are “in the know” or “part of the gang”? CryptoPunk NFTs are original digital artwork made by Larva Labs. These are unique collectible characters that have verified ownership on the Ethereum blockchain. They are not physical objects at all, but purely digital. They look just like icons or emojis, not at all like the works of art you would see in a gallery.

This shows that VISA is getting in on the DeFi (Decentralized Finance) market with NFTs. According to their recent tweet:

“Over the last 60 years, Visa has built a collection of historic commerce artefacts—from early paper credit cards to the zip-zap machine. Today, as we enter a new era of NFT-commerce, Visa welcomes CryptoPunk #7610 to our collection”

NFTs like CryptoPunks, despite looking like mediocre art, hold plenty of value. A typical CryptoPunk can bid over $20,000 while the more in demand will bid in the millions of dollars. That shows that there is a big market for these collectibles and the buyers have plenty of money to spend. This is not your basic retail market where items cost a few dollars. This is a big money market, and it has attracted VISA’s attention.

What makes CryptoPunks desirable as a collectible is their uniqueness. A CryptoPunk character (i.e. Punks) is algorithmically generated by computer, not manually created by a human artist. There are also different types like Apes, Zombies and Aliens. Each CryptoPunk character has their own set of attributes and their metadata are recorded on the Ethereum blockchain. That also includes the proof of ownership to the holder of the NFT.

It seems like VISA will hold this NFT for the collection purposes. It will hold the CryptoPunk for historical records, perhaps to document a time when NFTs first emerged. This will surely be valuable in the future, whether NFT continue to become successful or not. Just owning a piece of history is valuable in itself, so VISA is going to look back on this as having a memento to that timeline. Overall the NFT market continues to grow. According to Forbes, the NFT market grew 1,785% In 2021. It is now the fastest growing sector in DeFi that is also gaining pop culture adoption and VISA is jumping on board.

Moving forward, it looks like VISA is also on the horizon ready to enter new partnerships and projects related to NFTs. As a payment processor, VISA can help bridge the traditional finance market with the DeFi space. That opens a world of opportunities for buyers, sellers and developers.

London Hard Fork Brings The Burn To Ethereum

The Ethereum network has activated the London Hard Fork successfully (12:34 UTC, Block# 12,965,000, 8/5/2021). In the first two days, $30 Million of ETH (Ether) were burned. That amount of ETH burned, removes approximately 3,000+ ETH from circulation. This is part of the EIP 1559 specification in which a certain portion of the transaction fee is burned per transaction. The hard fork also makes transaction fees on the Ethereum blockchain more predictable. This creates lower gas fees that can bring the costs of transactions down since there is now a base fee.

The introduction of a base fee addresses the volatility in transactions. This is regarding the cost of gas prices during times of network congestion. When the network is at its busiest, the cost of gas can suddenly increase which is why recent transaction costs on the Ethereum network has been high. With a base fee, this can prevent gas prices from suddenly shooting up to levels where it makes more sense to send large transactions than lower ones.

Since Ethereum uses an inflationary currency model, the burning introduces a deflationary system for the first time. This puts a check on the amount of ETH in circulation, which can affect prices to the upside. This has become controversial since it affects miner rewards, but the Ethereum network is moving away from mining (Proof-of-Work) consensus. A protocol difficulty bomb is part of the design for Ethereum 2.0 (ETH2.0) that will make mining more difficult, encouraging validators to move towards staking (Proof-of-Stake) consensus. The London Hard Fork will delay this at the moment to allow time for transition.

In a nutshell the London Hard Fork has enabled the following features:

Establish a base fee for transactions
Provide more transparency and predictability to transaction fees
Make ETH a more deflationary asset with a burning mechanism

Here are other EIPs activated during the London Hard Fork:

EIP 3554 delays the “difficulty bomb”.

EIP 3529 reduces gas refunds. Gas tokens (e.g. Chi) will become obsolete.

EIP 3198 allows users to return the base fee opcode.

EIP 3541 enables future upgrades to the Ethereum Virtual Machine (EVM)

Overall this introduces steps that will bring Ethereum closer to a minerless future. This gives time for miners to transition to staking, but once the difficulty bomb is activated it begins the “Ice Age” for mining. The new structure for transaction fees is also a positive development in light of the skyrocketing costs to run a transaction on the Ethereum blockchain. It doesn’t exactly lower gas prices, but makes it more manageable with a base fee. At least users will not have to deal with sudden increases when all they want to do is transfer ETH to another wallet or swap tokens. ETH will also be headed towards a more deflationary asset as well, with the burning of portions of its transaction fees. All of this creates positive market signals that drives further utility on the Ethereum blockchain.

(Photo Credit by Chris Schippers)

Come On Amazon, Get Into Crypto Already

In Big Tech, Apple was usually the one who was late to the party. When it comes to crypto, that does not seem to be the case. Apple has made moves to hire an “alternatives payment” manager that we can assume involves cryptocurrency. It became obvious when one of the key qualifications mentioned was experience with cryptocurrency. Google has been involved with blockchain technology related matters like their partnership with Theta Labs network. Other Big Tech companies like Twitter, Facebook and Microsoft have dabbled with blockchain and cryptocurrency on occasion but there is one company that we have not heard much about recently being involved in crypto … Amazon.

Amazon has actually patented a blockchain-based product authenticator back in 2020. It is not using cryptocurrency (as of writing) and has not really been in the news much. Amazon even removed crypto from their payment methods from the Twitch.TV platform . There is however news that Amazon is moving towards cryptocurrency payments. Just like Apple, Amazon is looking for a digital currency and blockchain expert. They might be considering crypto payments for their online retail business.

It is a big deal if Amazon embraces crypto. Not just for payments, but if the company invests in digital assets like Tesla. Amazon has a large retail empire which they could open to retail for cryptocurrency. This will most likely require payment processors like Visa, who have started to process cryptocurrency for payments in 2021. Amazon may permit payment processors to handle cryptocurrency to fiat conversions, meaning the final payment will still be in fiat.

Developers would find it an opportunity to create gateways for payment processors from crypto to fiat. Regulations must be followed as part of jurisdiction laws, so how it will be implemented is the challenge. The less you have to deal with regulators, the better it will be to just allow others to deal with it. Then again why would Amazon need a third party, when they are more than capable of implementing a system with their vast resources available.

According to an Amazon spokesperson:

“We’re inspired by the innovation happening in the cryptocurrency space and are exploring what this could look like on Amazon. We believe the future will be built on new technologies that enable modern, fast, and inexpensive payments, and hope to bring that future to Amazon customers as soon as possible.”

It sounds like the type of news that can move the market to the upside. It is also what speculators want to hear because it can generate more interest in Bitcoin and other cryptocurrency. That usually leads to FOMO buying sprees that help drive prices of digital assets higher. While the news cycle from the media had been full of FUD the past few weeks since “Elon FUD” back in May, it has since become more positive. Whether or not Amazon does finally consider cryptocurrency payments or develop their own token, they have confirmed their interest. For many analysts that is a sign that cryptocurrency is not about to go away any time soon.

(Cover Photo Credit by Anna Shvets)

Apple Pay and Coinbase Bring Crypto Payments To Retail

As of June 2021, users who have Apple Pay can now pay for items with cryptocurrency by way of the Coinbase debit card. The card also supports Google Pay with the option to pay with cryptocurrency like Bitcoin and Ethereum. In a press release statement (From the Coinbase blog):

“You can now use your Coinbase Card with Apple Pay and Google Pay to make it even easier to spend crypto at home and on the go.”

It is Coinbase that has integrated cryptocurrency payment options, and is not directly from Apple Pay. This means that users will need a Coinbase card first, which can then be added as a payment option on Apple Pay.

Coinbase provides a debit card from which users can attach their cryptocurrency wallet to use funds. One of the perks it offers is a cash-back spending feature (up to 4% according to Coinbase). This rewards heavy users back to their iPhone.

Before a user can pay with cryptocurrency, it is clear that it is not a direct exchange of value. It must first be converted to fiat at the point-of-sale. The merchant must also support payments in cryptocurrency, so this means that users cannot just use their card to make any payment in cryptocurrency. Merchants who accept the card can offer designated cryptocurrency payment methods (e.g. ETH, XLM, BTC).

Cryptocurrency debit cards are providing users not just a new payment method, but a way to actually use digital assets as a medium for exchange. They can be used to pay for goods and services where it is accepted, and that allows more utility for cryptocurrency. There are other types of cards offered by Crypto.com and BitPay, with their own reward system for users.

With crypto payments going toward mainstream adoption, the question is whether the volatility will have any negative effect. An example of this is sudden change in price of a cryptocurrency in the middle of a transaction. How will payment processors handle the variations, which can suddenly increase or decrease without warning? The idea is making the payment at the point-of-sale, but users may delay in paying from the time of quote. In the real world, prices are fixed with fiat currency and users pay for an item as listed. Prices don’t suddenly change after a few minutes. With crypto, prices can suddenly change while a user is waiting to make a payment. This is certainly something that will be tested.

Certain crypto, like Bitcoin, may be considered too valuable to spend. However, that would probably be the digital asset merchants would like to accept for cryptocurrency payments. Users will have to consider whether they want to spend fractions of their BTC for a pair of sneakers or just HODL it. There are other crypto options of course, which is why this can still work out for both users and merchants. Another thing to take note of are the transaction fees. Users would probably want to use a blockchain where transaction fees are cheapest to spend their crypto.

Stablecoins may provide a better solution to go around the volatility. This might be a good option since it is pegged to more stable assets. Users can set their Coinbase card to use a stablecoin like USDC as their payment option method. All users will need to do is convert a certain amount of their base crypto like Bitcoin to a stablecoin. From there they can fund their debit card with less worries about volatility.

Both Apple Pay and Google Pay come from large tech platforms that serve millions of users. Integration with cryptocurrency payments is further simplified through the use of smartphones. Apple Pay users have iOS (iPhone) while Google Pay users have Android (Samsung, OnePlus, Huawei, etc.). This finally takes the world of retail digital payments to the blockchain.

The Alonzo Hard Fork – The Road To Cardano Smart Contracts

The launch of the Alonzo hard fork signals the next stage in the Cardano roadmap. This provides the path to the Goguen phase, which introduces smart contracts to the network. This will take place in multiple phases represented by colors. The current phase is called Alonzo Blue, to be followed by Alonzo White and Alonzo Purple. What is coming are the feature for developing applications. Alonzo is the upgrade that will allow developers to build DApps (Decentralized Applications) that run on a secure and mathematically verifiable network.

According to the Cardano testnet site:

“The ‘Alonzo’ hard fork will bring exciting and highly-anticipated new capabilities to Cardano through the integration of Plutus scripts onto the blockchain. These will allow for the implementation of smart contracts in Cardano, enabling the deployment of a wide range of new DeFi applications for the first time.”

Cardano (ADA) has been criticized for its slow development pace. This has anxious investors waiting for the release of products built on top of the Cardano blockchain. The Cardano team are doing this with purpose to be able to release a peer reviewed system that is stable, secure and quality tested. That can only be possible by following the roadmap set by the developers. It begins with the foundation to build a core network that was introduced in the Byron phase. Next came the decentralization of the core network, which was the purpose of the Shelley phase. Now comes the ability for developers to build on top of the Cardano blockchain, like how developers use the Ethereum blockchain for smart contracts and DApps.

The smart contracts used in Cardano are written using the Plutus programming language. It is based on the functional programming language Haskell, which is used for reliable and mission critical application development (e.g. aerospace and defense software). The aim here is to provide a more stable code for smart contracts, which are critical in nature. That means a more sound way to execute DApps on the network, that minimizes logic errors and capable of scalability.

The Alonzo Blue phase will bring the testnet live by the end of May 2021. It will be open to a select group of partners and developers to test the codebase. The Alonzo White phase comes around July 2021 and will bring in more participants for testing. Alonzo Purple will then open up the testnet to the public. This is in preparation for opening the system up to other users to test the performance of Cardano smart contracts. With these developments, the smart contract platforms will get more competitive in the cryptocurrency markets. Ethereum and Binance Smart Chain (BSC) are going to see a new platform to compete with.

Unlike most projects, Cardano has a reputation for being slow. Founder Charles Hoskinson wants to take the slow tortoise approach to development, rather than giving too many updates right away. The team’s objective is to release quality controlled and tested software that is reliable and secure. They want to make sure they avoid many bugs and flaws that could compromise the system. Perhaps we can now see the fruits of their labor.

Ethereum Berlin Is Here, Next Stop Is London

The Ethereum blockchain has implemented the Berlin hard fork at block 12,244,000 this past Thursday (April 15, 2021). This was not the anticipated Optimism Rollout yet, but instead are a set of improvement proposals to help the network with gas costs and security.

Berlin was supposed to implemented in 2020, but as with most Ethereum projects it got pushed back. There were centralization concerns around the Geth client on which most Ethereum nodes operate. An important feature of Berlin is the live swapping of Ethereum from a proof-of-work to a proof-of-stake blockchain.

Other important features of Berlin are optimizations for smart contracts including gas efficiency, updates to EVM code and protection against DDOS attacks.

The upgrade implements the following:

EIP-2565, reduces gas cost for a specific transaction type that uses modular exponentiation.
EIP-2718, makes all transaction types “backwards compatible” using so-called “envelope transactions,” which allows the addition of new transaction logic into Ethereum.
EIP-2929, increases gas costs for “op code” transactions, a pain point for denial of service attacks on Ethereum in the past.
EIP-2930, a new transaction type (made possible by EIP-2718’s envelope transactions) which allows its users to create templates for future, complex transactions in a bid to lower gas costs.

The upgrades are in line with the bigger upgrade that will introduce EIP 1559 called London.

Tokenizing Stocks Is The Next Financial Instrument

Binance is offering a new financial instrument on its digital exchange. They are offering a way to purchase fractions of a company’s shares using a tokenized stock trading service. This will provide stock traded equities in financial markets for investors. Binance will begin with Tesla stock on their exchange. The instrument is called a Binance Stock Token, and this allows users to buy a stock or a fraction of a share and earn dividends as well. The prices will be settled in Binance’s BUSD stablecoin token.

For users who have no access to financial markets, they now have an opportunity to own as little as 1/4 of share in an equity like Tesla (TSLA). There is no more need to purchase several stocks when you can have just a fraction and earn from it. This gives exposure to the non-traditional crypto investors who don’t have to wait for other platforms to offer the service.

S = Shares of A Stock
p = Price of the Stock
b = BUSD

b = S(p)

The user will purchase the stock in BUSD prices (b).

Binance claims that they are not creating synthetic assets to offer as stock. They have an asset that is backed by a depository portfolio of underlying securities, which is also managed by a German investment firm. In order to follow compliance, the service is not available to all jurisdictions and only where the exchange is allowed to offer such a service. Those interested will definitely be required to submit a KYC/AML document for legal purposes.

Two things that I can expect to see:

Increase in BUSD trading as a result of the tokens use for investing in stocks. BUSD prices will not surge because it is pegged 1:1 with the USD.
Open up the stock market to first time investors who have never had exposure to equities. This allows users who were either not allowed to trade because of lack of funds or not have access to stock investments to get their chance.

It is interesting to note if other DeFi products will follow that can interact with the Tesla stock. Binance also has its native Binance Smart Chain(BSC) which uses smart contracts that can lock tokenized stocks in a different protocol and earn from it. Some DeFi protocols may even accept tokenized stocks as collateral, depending on how valuable it is in the market.

This can also further boost Tesla stock prices as it has seen a phenomenal surge. Binance can gain more investors while helping bring Tesla stocks higher. While the trends look good for Tesla, investment always involves risk so users must do their due diligence and research always before investing.

Disclaimer: This is not financial advice. The information provided is for educational and reference purpose only, not for making investments. Do your own research always.

VISA Forges New Connection Between Fiat And Cryptocurrency

Payments giant and credit card company VISA, have announced they are providing support for cryptocurrency payments using the USDC stablecoin starting with partner Crypto.com. USDC is an ERC-20 token that runs on top of the Ethereum blockchain network. This makes use of a stablecoin to settle payments using VISA payment products through their partners. At the moment VISA will pilot the payment system with Crypto.com, a cryptocurrency platform and digital exchange, with plans to offer the service to other partners. VISA is going to make using cryptocurrency much more available for payments. This legitimizes cryptocurrency payments for goods and services, since VISA is a financially regulated entity.

This is a bridge between traditional finance with emerging fintechs involved with cryptocurrency and digital assets. VISA had tried to bridge cryptocurrency payments before, but plans fell through. Perhaps VISA is now ready to provide the service with more knowledge and understanding of cryptocurrency. This allows VISA to better understand the new space fintechs are operating from, which involves innovative products that implement digital currency and blockchain technology. Perhaps it is a sign that changes are coming to traditional financial systems. VISA has been warming up to cryptocurrency and other digital currency (non-crypto) as evident from their more recent postings.

Before VISA, payments processors like PayPal and Square have provided support for cryptocurrency. PayPal has paved the way for users to buy cryptocurrency like Bitcoin through their app. Square allows their customers to buy, hold and sell cryptocurrency through their platform, including the Cash app. Prior to that, there were not many mainstream apps other than those provided by digital exchanges like Coinbase that allow their users to purchase cryptocurrency. VISA is different in that it is providing a way for customers to make payments with the cryptocurrency they hold. This is a layer that has been missing and it could accelerate utility of cryptocurrency as a payment method. Using the blockchain may also provide faster settlements compared to the current system, but scaling remains to be seen on blockchain networks like that of Ethereum.

While the purpose of cryptocurrency is for open direct payments system (Peer to Peer), VISA is not exactly that type of platform. It still operates under the traditional financial system, which is highly centralized and permissioned. That means VISA is not exactly an open network, it requires a membership for its customers. That is why the product they offer is more of a bridge between the traditional fiat system and cryptocurrency. The decentralized aspect of a transaction still falls under the blockchain layer, but through a VISA payment gateway. In the case of USDC, the payment is from a user’s digital wallet on the Ethereum blockchain or even a custodial wallet that supports USDC. What VISA provides is a way to make that payment possible to retailers who will accept the transaction. VISA has so many partners in the retail space that they work with, this opens opportunities for cryptocurrency companies like Crypto.com to have access to more traditional financial markets.

VISA could also open another bridge, this time to the DeFI space of the blockchain. Most platforms in DeFi run over the Ethereum network, but other platforms like Binance, Polkadot and Cardano offer their own ecosystems that provide DeFi apps. If there is integration to support VISA, that can bring more users to the DeFi space who are using VISA credit cards or payment applications supported by the VISA network. At the moment, VISA and other credit card companies do allow customers to purchase cryptocurrency from digital exchanges. Opening up to support decentralized exchanges in the DeFi space are more challenging due to regulatory compliance. If this can be resolved, it opens up the space to allow interoperability of dissimilar payment networks to become possible.

This is overall good for the Ethereum network. VISA will not only need to have USDC, but also Ethereum’s native token ETH (ether). In order to process transactions using USDC, small denominations of ETH are used to pay for costs called “gas” which are part of the transaction fees paid to the network. This is for processing transactions that have to be verified and secured on the blockchain. It may also be likely that it will be VISA’s partners who hold the USDC and ETH, while VISA just helps bridge the retail merchants with the cryptocurrency payment as the settlement layer. The main issue with Ethereum has been scaling, but the development community is fast tracking efforts to scale the network.

With VISA’s announcement, other payment companies like Mastercard and American Express should take notice. This introduces a business model that brings cryptocurrency native platforms with the traditional retail space. The predominant form of payment in the VISA network is by credit and debit card. By integrating a cryptocurrency method into the network, it opens up new channels for making payments. The choice of using a stablecoin also makes plenty of sense given that cryptocurrency is very volatile. This changes the narrative that cryptocurrency is trying to replace traditional finance. Before that can happen, it must have greater utility. Perhaps VISA can help bring it to more mainstream adoption, to the point where we can buy toilet paper with cryptocurrency.

(Image Credit: Photo by Tom Fisk)